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Optimal Carbon Capture and Storage Policies

  • Ayong Le Kama, Alain
  • Fodha, Mouez
  • Lafforgue, Gilles

Following the IPCC's report (2005), which recommended the development and the use of carbon capture and sequestration (CCS) technologies in order to achieve the environmental goals, defined by the Kyoto Protocol, the issue addressed in this paper concerns the optimal strategy regarding the long-term use of CCS technologies. The aim of this paper is to study the optimal carbon capture and sequestration policy. The CCS technologies has motivated a number of empirical studies, via complex integrated assessment models. This literature always considers that the existing technology allows sequestrating a fraction of the carbon emissions and concludes that the early introduction of sequestration can lead to a substantial decrease in the cost of environmental externality. But, the level of complexity of such operational models, aimed at defining some specific climate policies. We develop a very simple growth model so as to obtain analytical and tractable results and therefore exhibit the main driving forces that should determine the optimal CSS policy. We show within on the cost of extractions, CSS may be a long-term solution for the carbon emissions problem. Besides, it is also shown that the social planner will optimally choose to decrease the rate of capture and sequestration. Besides, we also introduce the decentralization of this simple economy, by considering the individual program of the fossil resource-holder and the one of the representative consumer. This helps us to compute analytically the optimal environmental policy, that is the also the optimal fossil fuel price profile.

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 09-095.

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Date of creation: 02 Oct 2009
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Handle: RePEc:tse:wpaper:22199
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  1. Alain Ayong Le Kama & Mouez Fodha, 2008. "Optimal nuclear waste burial policy under uncertainty," Documents de travail du Centre d'Economie de la Sorbonne v08092, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  2. André Grimaud & Gilles Lafforgue & Bertrand Magné, 2009. "Climate Change Mitigation Options and Directed Technical Change: A Decentralized Equilibrium Analysis," CESifo Working Paper Series 2875, CESifo Group Munich.
  3. Alain Ayong Le Kama & Katheline Schubert, 2006. "Ressources renouvelables et incertitude sur les préférences des générations futures," Revue d'économie politique, Dalloz, vol. 116(2), pages 229-250.
  4. Lafforgue, Gilles & Magné, Bertrand & Moreaux, Michel, 2007. "Energy Substitutions, Climate Change and Carbon Sinks," IDEI Working Papers 427, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Lionel Ragot & Katheline Schubert, 2006. "The optimal carbon sequestration in agricultural soils : does the dynamics of the physical process matter ?," Cahiers de la Maison des Sciences Economiques v06040, Université Panthéon-Sorbonne (Paris 1).
  6. Edenhofer, Ottmar & Bauer, Nico & Kriegler, Elmar, 2005. "The impact of technological change on climate protection and welfare: Insights from the model MIND," Ecological Economics, Elsevier, vol. 54(2-3), pages 277-292, August.
  7. Smulders, J.A. & Gradus, R.H.J.M., 1996. "Pollution abatement and long-term growth," Other publications TiSEM 1ed65010-f4ac-4a1f-84b6-4, Tilburg University, School of Economics and Management.
  8. Kurosawa, Atsushi, 2004. "Carbon concentration target and technological choice," Energy Economics, Elsevier, vol. 26(4), pages 675-684, July.
  9. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-74, December.
  10. repec:hal:journl:hal-00267891 is not listed on IDEAS
  11. Ayong Le Kama, A. & Schubert, K., 1999. "Growth, Environment and Uncertain Future Preferences," Papiers d'Economie Mathématique et Applications 1999.52, Université Panthéon-Sorbonne (Paris 1).
  12. repec:hal:journl:halshs-00206513 is not listed on IDEAS
  13. Reyer Gerlagh, 2006. "ITC in a Global Growth-Climate Model with CCS: The Value of Induced Technical Change for Climate Stabilization," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 223-240.
  14. Alain Ayong Le Kama, 2001. "Preservation and exogenous uncertain future preferences," Economic Theory, Springer, vol. 18(3), pages 745-752.
  15. Edmonds, Jae & Clarke, John & Dooley, James & Kim, Son H. & Smith, Steven J., 2004. "Stabilization of CO2 in a B2 world: insights on the roles of carbon capture and disposal, hydrogen, and transportation technologies," Energy Economics, Elsevier, vol. 26(4), pages 517-537, July.
  16. Frederick Ploeg & Cees Withagen, 1991. "Pollution control and the Ramsey problem," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 1(2), pages 215-236, June.
  17. Reyer Gerlagh & Bob van der Zwaan, 2006. "Options and Instruments for a Deep Cut in CO2 Emissions: Carbon Dioxide Capture or Renewables, Taxes or Subsidies?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 25-48.
  18. John Hartwick, 1977. "Intergenerational Equity and the Investment of Rents from Exhaustible Resources in a Two Sector Model," Working Papers 281, Queen's University, Department of Economics.
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